CHRISTINE ELIZABETH BARBER V SUZANNE LYNNE COTTLE AND ORS CA637/2009

CHRISTINE ELIZABETH BARBER V SUZANNE LYNNE COTTLE AND ORS CA637/2009 22 March 2010IN THE COURT OF APPEAL OF NEW ZEALAND CA637/2009 [2010] NZCA 31BETWEEN CHRISTINE ELIZABETH BARBER Applicant AND SUZANNE LYNNE COTTLE First Respondent AND ROBIN STEWART COTTLE Second Respondent AND ALAN MERVYN HERBERT Third Respondent AND SUSAN VILORA HERBERT Fourth Respondent AND PAPAITONGA SPRINGS LTD Fifth Respondent Hearing: 16 February 2010 Court: O'Regan, Arnold and Baragwanath JJ Counsel: J McGuire for Applicant W C Pyke for Respondents Judgment: 22 March 2010 at 4 pmJUDGMENT OF THE COURTA The application for an extension of time within which to file an appeal is declined. B We make no order as to costs.REASONSO'Regan and Arnold JJ [1] Baragwanath J (dissenting) [16]O'REGAN AND ARNOLD JJ(Given by Arnold J) [1] The applicant, Mrs Barber, seeks an extension of time within which to file an appeal against a judgment of Mallon J given on 13 March 2008. 1 Her application was filed in this Court on 8 October 2009, some 18 months out of time.A brief background[2] The litigation arises out of a land transaction which occurred in late November 1998. Mrs Barber entered into an agreement for the sale of a block of land which she owned to the fifth respondent, Papaitonga Springs Ltd (PSL), for $700,000 plus GST. The remaining respondents were, with two others, shareholders in PSL. The first respondent, Mrs Cottle, was also Mrs Barber's real estate agent on the sale. Accordingly, by virtue of ss 63 and 64 of the Real Estate Agents Act 1976 she was required to provide Mrs Barber with an independent valuation within a fixed period. After purchasing the property, PSL sold part of it to the Department of Conservation (DOC) for $72,500 and subdivided the remainder, making a profit on the subdivision of something in the order of $1.7 million. [3] Mrs Barber made various claims against the respondents. For present purposes, the most important are those against Mrs Cottle, in particular claims based on breach of fiduciary duty and failure to comply with her statutory obligations. In relation to the former, Mrs Barber alleged that Mrs Cottle: (a) being her real estate agent, owed her fiduciary obligations;1 Barber v Cottle HC Palmerston North CIV 2004-454-756, 13 March 2008.(b) had a conflict of interest on the transaction because she had an interest in the purchaser, PSL; (c) breached her obligations to Mrs Barber by not marketing the property as one having subdivision potential and by not disclosing her conflict of interest or the true value of the property. In argument before us, Mr McGuire (who did not appear at trial) also noted that Mrs Cottle did not disclose that principals of PSL were in negotiation with DOC for the sale of part of the property prior to the making of the agreement for sale and purchase, although that was not a pleaded breach. In effect, then, Mrs Barber alleged that Mrs Cottle hid both her interest in the property and its true value. [4] Mrs Barber alleged that the property had been sold at an undervalue because the price did not recognise the property's potential for subdivision. She sought to recover: (a) $373,800 (plus GST), being the undervalue; (b) $18,000 (plus GST), being the commission paid to Mrs Cottle. [5] Mallon J found that Mrs Cottle owed Mrs Barber fiduciary obligations but held that she had not breached them. Further, she considered that even if Mrs Cottle had breached her obligations, Mrs Barber suffered no loss because the purchase price of $700,000 (plus GST) represented a fair market value for the property. Mallon J did order the return of the commission, however. In relation to the breach of statutory obligations claim, Mallon J found that under the sections Mrs Barber had the right to rescind the contract or to affirm it and seek the return of the commission. She did the latter.Approach to application for extension of time to file appeal[6] In terms of r 29A(2)(b) of the Court of Appeal (Civil) Rules 2005 the application is to be dealt with as if it was an application for leave to appeal. Theapproach to be adopted is accurately summarised in McGechan on Procedure.2 The essential question is whether an extension of time will meet the overall interests of justice. The Court will consider factors such as: (a) The length of the delay and the reason for it. (b) The extent of any prejudice flowing from the grant of an extension. (c) The merits of the appeal. (d) Whether the appeal raises any issue of public importance.Application of principles in this case[7] In the present case, we consider that we must refuse an extension of time. There are two reasons for this, relating to the length of the delay and the reasons for it and to the merits of the proposed appeal. We address each in turn.Length of delay and reasons for it[8] As we have said, the delay in filing the appeal is some 18 months. On any view, this is a lengthy period. There is a strong public interest in resolving disputes within a reasonable timeframe. The events at issue occurred in late 1998. In the High Court the proceedings had a somewhat chequered history, although the responsibility for that does not rest solely with Mrs Barber or her legal representatives. But the respondents do have a legitimate expectation of finality. We accept that this is not determinative, but it must be given some weight. [9] Mrs Barber has filed two affidavits in which she explains why the delay occurred. Mrs Barber is English. In October 2007 she returned to England to look after her elderly parents. At that time her father was unwell, and subsequently died in early 2009. In addition, her mother had a stroke. As a consequence Mrs Barber did not return to New Zealand until early June 2009.2 Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [CR29A.03].[10] Mallon J delivered her judgment in March 2008. Mrs Barber deposes that she was aware of the judgment (although did not receive a copy of it) but did not know that she had to file an appeal within any particular time. She says that she never received advice about this from her legal advisors. Mrs Barber says that her priority in this period was initially looking after her parents and then dealing with her father's estate and making arrangements for her mother's care. As she put it, she had "far more important things to worry about" than an appeal. [11] While we sympathise with the difficulties faced by Mrs Barber in caring for her elderly parents, we do not consider that the explanation which she has given for the delay is sufficient. First, we do not accept that she was unable to find time to deal with the litigation after the decision was given. She does not appear to have made any effort to contact her solicitors to find out about her appeal rights, or to have left instructions for them to contact her once the decision was known and advise her as to future steps. Second, it appears that her husband remained in New Zealand during this period and that he held a power of attorney from her. Mrs Barber could have arranged for him to take the necessary steps.Merits of the appeal[12] The merits of the proposed appeal are an important consideration. However, Mrs Barber faces some difficulty on that front as well. [13] There is no dispute that Mrs Cottle owed Mrs Barber fiduciary obligations. In light of the analysis underlying the Supreme Court's decision in Premium Real Estate Ltd v Stevens3 (which was given after Mallon J's decision in the present case) we consider that it is at least arguable that Mrs Cottle breached those obligations, contrary to Mallon J's finding. In addition, it is clear that Mrs Cottle did not comply with her statutory obligations. [14] But the difficulty is that Mrs Barber sought damages representing the under- value at which she claimed the property was sold, rather than an account of profits.3 Premium Real Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384.Mallon J found that the sale price did reflect a fair market value. Accordingly, Mrs Barber suffered no loss apart from the payment of the commission, which Mallon J ordered to be re-paid. Had an account of profits been sought (even in the alternative), a different analysis could have been employed. Unfortunately for Mrs Barber, it is now far too late to re-cast the claim.Decision[15] We decline leave for an extension of time within which to appeal. In the circumstances, we make no order as to costs.BARAGWANATH J[16] In this case a land agent was one of the purchasers of her client's property. The client, Mrs Barber, pleaded in her statement of claim:4The [defendant purchasers, including the land agent] held the property on trust and were liable to account to the plaintiff for the property. [17] The Judge dealt as follows with the plea of breach of trust: [176] It is alleged that having procured the land in breach of duty to disclose a conflict of interest and by deceit, the property is held on trust and the purchasers are liable to account to Mrs Barber. She correctly added: It is alleged that Mrs Barber's loss is the difference between the sale price and the market value. She then said:I agree with the purchasers that this cause of action does not add anything to the first and second causes of action. The first and second causes of action have not been established and so the property is not held on trust as is alleged. This cause of action is therefore not made out.4 At [76].[18] In my view the italicised passage is likely to be wrong in law. As the majority observe at [13], it is at least arguable that Mrs Cottle breached the obligation of fiduciary duty discussed by the Supreme Court in Premium Real Estate Ltd v Stevens. That principle was well-settled; Boardman v Phipps5 is a familiar example of its operation. In law the consequence of such breach is customarily what Blanchard and others Civil Remedies in New Zealand term "disgorgement".6[19] The real question is whether the plaintiff should be permitted to appeal when a misconceived remedy, of damages, was sought; disgorgement was never sought even in this Court; and so long was allowed to elapse before the application for leave. [20] I have taken time to consider my opinion. I have sympathy with the view of my brethren that it is simply too late to pursue an application which would require on appeal a claim for a remedy never sought below or indeed in argument in this Court. [21] Were this not a fiduciary case I would decline leave. As it is I would prefer to permit the plaintiff, if so advised, to formulate a disgorgement case; the defendants to reply; and then restore the leave application for further argument. [22] That is because I do not share the majority's view at [14] that, because Mrs Barber sought damages for the alleged sale at undervalue rather than an account of profit, the case as pleaded had little prospect of success. My reasons are: (a) The deficiency in the pleading went to the remedy sought. Such claim is subordinate to the well-arguable claim as to the breach of substantive right. (b) There is in my view a very substantial argument that the High Court erred in finding there was no such breach. (c) The natural, and indeed inescapable, consequence of the property being held on trust is that Mrs Cottle is required to5 Boardman v Phipps [1967] 2 AC 46 (HL).6 Peter Blanchard (ed) Civil Remedies in New Zealand (Brookers, Wellington, 2003) at [8.2].account to Mrs Barber for any profit made from the property, of which Mrs Barber is equitable owner. (d) The cause of action alleged, breach of fiduciary duty, is an equitable cause of action. (e) The courts view breach of such duty with disfavour, which is why the remedy is more extensive than for breach of other obligations. For that reason I would be more reluctant to refuse leave. [23] It is true that the courts must discourage last-minute attempts to run a case in another direction. But here there can be no estoppel by election. The likely flaw in the conduct below related to an underclaim – limited to damages – rather than a claim on a different substantive ground. I see no injustice in permitting the plaintiff, on terms as to costs, to pursue in proper form the claim she pleaded and took to trial that the defendant purchasers, including the land agent Mrs Barber: held the property on trust and were liable to account to the plaintiff for the property [24] Leave could even now be given to seek a disgorgement remedy. Any disadvantage to the purchasers caused by the grant of leave and wasted costs can be compensated by abatement of the plaintiff's remedy. That is the course I would prefer.Solicitors: Jeremy McGuire, Wellington for Appellant Bryce Bluett, Hamilton for Respondents